Since the early 2000s, the Australian dollar has traded in a fairly narrow range against the pound, with a conversion rate usually around AUD to GBP 0.60. Even at its highest conversion level in the past ten years, it still only managed a rate of 0.6849. This higher conversion rate for the Australian dollar was most likely not attributable to the Australian economy, which had been showing signs of a weakening economy for some time, brought on by slower annualized growth rates that had started cooling in 2011. The decline in growth was caused by a drop-off in mining investments, weakened consumer sentiment and consumption, and labor markets that were weakening.
The higher rate was more likely a cause of the weakening pound sterling, due to several factors in the UK. The monetary policy ascribed to by UK officials was one of quantitative easing. Increasing the money supply contributed to a declining pound sterling exchange rate against the euro, the US dollar, and the Australian dollar, as well as other major world currencies. The UK was also suffering from a heavy load of debt in its public sector. Analyst forecasts predicted that this debt level was set to rise even higher, and would ultimately account for too high a percentage of the countrys GDP. In line with these estimates, Moodys rating agency downgraded the UKs debt to AA1 in the spring of 2013, citing the countrys stagnant growth and the inevitable decrease in tax revenues brought on by the lack of growth as the main reasons for the downgrade.
The UKs current account deficit was also a concern. It was considered one of the worst in the developed world, and analysts believed it could eventually have a negative effect on the UK economy.